North Bay Business Journal

Monday, January 7, 2013, 6:30 am

Wealth Matters: As dust settles, North Bay ponders impact of ‘fiscal cliff’ deal

Many provisions extended, but experts worry about debates to come


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    As the dust settles from the congressional wrangling over a set of tax provisions to avert the so-called “fiscal cliff,” North Bay financial planners said one thing is clear — few will escape the impact, but those fearing economic Apocalypse in 2013 can breathe a sigh of relief.

    Yet those same individuals also expressed caution: while the recent legislation has cracked open a window of clarity for tax planners and others, a Congress hungry for new revenue could still take up any of a number of high-profile provisions in the months to come.

    Nick Donovan

    “I’m wondering if, in the next round of negotiations, they’re going to get into some of the details that really matter to us,” said Nicholas Donovan, partner and chair of the Succession Planning Group at the Napa-based law firm Gaw Van Male. “We’re in a little bit of a holding pattern. If someone came and said they wanted to do estate planning right now, in Jan. 2013, we might tell them, ‘OK, that’s fine, but we might want to wait until some of these negotiations continue.’”

    Among the tax provisions continued in the American Taxpayer Relief Act is one that has caused a boon for attorneys and accountants in the realm of estate and succession planning: a $5 million inflation-adjusted exemption on estate and gift taxes for individuals, and up to $10 million for couples.

    While Congress increased taxes beyond that exemption to 40 percent, up from 35 percent, many had speculated that the exemption would be lowered to $3.5 million or even the traditional $1 million in 2013. The exemption has been a boon for many business owners and wealthy individuals, including owners of vineyards and other agricultural businesses hoping to minimize the impact of passing a high-value land asset to the next generation.

    Also continued in the new legislation are a number of temporary provisions for small businesses. Congress continued an increased $500,000 limit on tax-deductible improvements and $2 million for investments by business owners. The 50 percent bonus depreciation also continues through 2013.

    Bruce Dzieza

    “There’s so much small business action in the North Bay,” said Bruce Dzieza, CEO of the wealth management and advising firm Willow Creek Financial Services in Sebastopol. “If you can have a $500,000 limit, that’s great.”

    Not all of the developments meant lower taxes, however. The legislation ended a 2 percent payroll tax “holiday,” bringing it back to 6.2 percent and adding an estimated average of $740 to every worker’s 2013 tax bill, according to the nonpartisan Tax Policy Center.

    Stuart Crandall

    “That’s going to affect everybody,” said Stuart Crandall, financial planner with Moss Adams Wealth Advisors in Santa Rosa. Every month,”that’s a car payment, a cell phone bill. … People will see that automatically disappear from their paychecks.”

    The increases compound for those at the highest income levels. The top federal rate for capital gains is now 20 percent for incomes above $400,000, added to a 3.8 percent tax to help fund health  care reform and the regular income tax that applies in the state of California. In total, those with the highest incomes in California could pay more than 33 percent on investment and other similar income. Those in the top federal bracket now pay 39.6 percent in regular income tax, up from 35 percent.

    Despite those increases, Mr. Crandall and others said that the bump was not as severe as some had expected.

    “Now, there’s some stability. People know it’s not the end of the world,” said Mr. Dzieza.


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